The Economies of Latin America: New Cliometric Data

By César Yáñez; Albert Carreras | Go to book overview

8
CAPITAL GOODS IMPORTS, MACHINERY
INVESTMENT AND ECONOMIC DEVELOPMENT
IN THE LONG RUN: THE CASE OF CHILE

André A. Hofman and Cristián Ducoing


Introduction

Studies about machinery equipment investment have a long tradition in economics and economic history. Since the analysis of the Industrial Revolution and the growth studies of the twentieth century, there are indications that economic growth of countries has a strong nexus with investment in capital formation and specifically, with the machinery equipment investment. However, in the case of developing countries there is a lack of quantitative studies in the long run about the relationship between growth and machinery equipment investment.

This study about machinery investment and growth addresses three critical elements. First, most studies are for a short period of time, twenty-five years or less. Second, the majority of papers present correlations with a great number of countries without a comparison of the kind of investment. A growth process based on capital formation in construction (dwellings and non-residential structures) differs from growth based on machinery investment. More specific, there is another relevant disaggregation: non electrical machinery, electrical machinery and transport equipment that should be take into consideration.

Third, a developing country, Chile was elected to study its relationship with machinery imports in the long run, in an attempt to give to the debate about capital formation and growth another vision.

The article is organized as follows: in section 2, theory and empirics of growth and capital (machinery equipment) investment is presented; section 3 shows the methodology of the data base of machinery imports in Chile; section 4 presents the econometric model to fit the data with the theoretical approach; section 5 the results of causality tests and section 6 concludes.

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